If the FCC had regulated the Internet from the beginning …

posted at 8:59 am on December 28, 2010 by Ed Morrissey

If the FCC had been given the authority to regulate the Internet from its commercial inception along the same lines demanded by its current commissioners, what would it look like today? Jack Shafer at Slate gives us a Potterville version of It’s A Wonderful Internet, with Cass Sunstein as a digital-age Potter, demanding that the denizens of his town kowtow to his will. How would the Internet, which has been an engine of economic expansion for almost two decades, have developed under the kind of top-down “fairness” rules demanded by Net Neutrality advocates today?

The FCC immediately determines that the lack of interoperability among the online systems harms consumers and orders that each company submit a technical framework by January 1994 under which all online companies will unify to one shared technology in the near future. The precedent for this are the technical standards that the FCC has been setting for decades for AM and FM, and for television. The online services threaten legal action again, and again Congress passes new legislation authorizing the FCC to do as it wishes. The online companies hustle to submit a technical framework. Microsoft wants in on the game, so it persuades the FCC to extend the framework deadline to July 1995. …

In late 1993, AOL and Delphi become the first online services to offer the Internet. The FCC orders both to drop the feature until the FCC’s labs approve it.

“We can’t have the online industry pushing out beta software on unsuspecting customers willy-nilly. Such software could compromise the users’ computers, interfere with other users’ computers, or crash the whole online world,” the FCC chairman says. …

“This award is made purely on the technical merits,” the FCC chairman remarks.

The FCC is particularly enamored of the “back door” that Microsoft has built into Bob, making it easier for police to monitor communications in real time. The commission also applauds Microsoft’s forward thinking because it has incorporated a virtual “V-chip” in Bob. The censoring software is analogous to the V-chip the FCC wants TV manufacturers to build into their sets to block violent and mature TV programming from being viewed by children.

The regulators also love Bob because it has created more “Channels” for police, fire, libraries, city councils, legislatures, courts, and public service messages than the other proposed systems. Bob testers complain that these channels leave little space for the data, information, and communications they expect to find on an online system. One compares Bob to a government designed version of the Yellow Pages, only duller. Another pines for the Wild West days of the unregulated online world when you didn’t have to pay virtual “parking” to your local municipality before you went shopping inside the online mall.

For those who don’t recall, or who have blocked the memory, “Bob” was an unmitigated failure by Microsoft for an operating system (really just an overlay for Windows) that gave novice users a supposedly friendly, safe interface. It did that by restricting how the computer could be used, while giving owners a treacly “smiley-face” character and other animated characters to shepherd users through a virtual house that opened applications such as a word processor and calender. Shortcuts to the program appeared in picture frames on the walls. The only thing missing was padding on the walls and a straitjacket for the user.

Jack has two things right about why the FCC would love Bob. It put you in your place, and it treated you like a child.

Be sure to read all of Shafer’s dark, dystopian vision. The moral of the story: someone will lead innovation and expansion on the Internet. Either we can maintain our leadership by maintaining the private property rights of those who build networks and create the applications and content that make it interesting and worthwhile to consumers, or we can watch as others take the leadership and build for the new online economy. The Internet in 20 years will bear as much relation to today as the 1993 version does for us now, and top-down regulation simply cannot plan well enough to allow us to realize its full potential in any circumstance, and certainly not if the government is focused on imposing a certain top-down, academic ideal of fairness as its primary purpose.

Barron’s takes a different direction, using a restaurant metaphor in its editorial blast against the FCC:

Last week, the FCC decided that the owners cannot operate their property to make as much money as they can for their investors, and to provide the services they think are demanded in the marketplace. Instead, the FCC says the owners of Internet property must protect the privilege of users to consume as much bandwidth as they please, transmitting any lawful content they please. They cannot limit access to their property by “bandwidth hogs” without asking for permission. Higher fees and traffic restrictions for heavy users must be “reasonable” in the eyes of the commission. We’d like to see FCC Chairman Julius Genachowski run a restaurant with all menu prices and quantities so regulated.

Laughably, the commission calls this a “pro-investment, pro-competition” policy. Others call it a policy to strengthen free speech, but they are using the wrong definition of free. The Internet isn’t provided free of charge; it’s property, built to return a profit by satisfying customers. That’s why it works so well. It doesn’t need a referee.

The FCC’s idea of “net neutrality” regulation threatens to confiscate that property, inch by inch. That will choke off investment, limit speech and reduce consumer choices.

The restaurant police may well be coming — in fact, to a certain extent they’re already here — but the point is well taken.